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Weekly Feed5 Mins Read

Kristal Weekly Feed | 01 June 2020

These are tough times and it can get difficult to understand and analyze major events around the globe and how they affect your investments. In our weekly market update, we help you slice and dice the latest news updates to make informed investment decisions.


Headlines this week:

  • Most markets around the globe managed to remain in the positive territory as investors were optimistic and hopeful about the lockdown restrictions easing and economies reopening. News about the commencement of human trials of a vaccine by Novavax helped boost the sentiment.
  • With the situation escalating in Hong Kong, tensions between the US and China have been increasing and keeping the markets in check.
  • European markets received a huge boost as the EU announced a 750 billion euro recovery fund to battle the worst economic crisis since the Great Depression in the 1930s.
  • Overall, most major indices across the globe posted gains for the week.

Tracking COVID-19

Covid-19 now has upwards of 6 million confirmed cases around the globe and the death toll is at 373,697.
Some positive news snippets:

  • Novavax Inc. announced the commencement of human trials of its vaccine against COVID-19.
  • Merck & Co. Inc. is working on two vaccines and an experimental drug to fight the virus.
  • More than 2.5 million patients have recovered from the virus.
  • A few other vaccines are also headed towards clinical trials soon.

Market Update

1. United States

The US markets continued their positive run from last week with most major indices closing in the green. Value stocks have been performing better than growth stocks. Also, the S&P 500 Index reached within 10% of it’s all-time high and came out of the correction territory.

The boosters
In this holiday-shortened week, all three major indices in the US managed to continue the positive run from last week and ended the month on a high note.
Novavax Inc. started human trials of its vaccine in Australia. Merck & Co. Inc. also announced that it was working on two potential vaccines and an experimental drug against COVID-19.
The rising economic activity across the country and easing of the lockdown restrictions boosted investor sentiment. While the US eased the restrictions on public gatherings, restaurants, and retail establishments, the number of new coronavirus cases didn’t rise as much as feared.
The economic reports of the week were less bleak than anticipated. The S&P 500 Index was up by
around 36% from its lowest level on March 23, 2020, and closed above the 3000-mark for the first time since early March.

The dampeners
There were a few factors that kept the optimism in check:

  • President Trump expressed his displeasure over China’s efforts to assume control over Hong Kong. This added to the already prevailing tensions between the two countries over the trade deal and the US’s displeasure over the way China had handled the pandemic.
  • President Trump signed an executive order this week for censorship of social media websites. This caused the shares of top social media companies to tumble.
  • An additional 2.12 million Americans filed jobless claims this week.

Europe

While the London Stock Exchange was closed on Monday, markets across Europe had a positive start to the week with the Stoxx 600 Index gaining nearly 1.5%. The optimism in the US markets rubbed off on the European investors too as markets reacted positively to the news about Novavax and Merck making progress in the development of a vaccine to fight against COVID-19. There is a growing optimism regarding the reopening of economies too. The European Commission declared a 750 billion euro recovery fund as the region prepares to face its worst economic crisis since the depression in the 1930s.
While the optimism was kept in check by the rising tensions between the US and China over the trade deal, the US’s allegation about China mishandling COVID-19 and the recent situation in Hong Kong, the recovery fund announced by the EU kept the mood optimistic. Overall, this was a good week and month for the European markets.

Asia Pacific

Most major indices in the Asia Pacific region posted gains despite the growing tensions between the US and China of multiple fronts. Here are some key points:

  • Japan lifted the state of emergency for the coronavirus this week.
  • Asia Pacific markets reacted positively to the news from Novavax Inc. regarding the commencement of the human trials of its coronavirus vaccine.
  • The investor focus shifted from virus-risk to political-risk in the region as tensions between the US and China took a new turn with the situation in Hong Kong.
  • The Australian markets had a good week with the Reserve Bank of Australia’s Governor saying that the economic downturn in the country will not be as severe as thought earlier.

Heading into next week…

In the coming week, some critical manufacturing-related reports are expected in the US. Also, the balance of trade report for April, non-farm payrolls for May, and the unemployment rate report for May is expected this week. Manufacturing-related reports are also expected in the European markets next week. Additionally, the GDP growth rate reports and unemployment reports are expected in several countries in the region. While investors will be watching the spread of the pandemic along with the easing of the lockdown restrictions closely, escalating tensions between the US and China will need to be kept in perspective too.

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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